https://mises.org/wire/how-champions-poor-become-tyrants
In a free society, income and wealth gaps are driven by variations in skill, knowledge, talents, independence, creativity, drive, and willingness to take risks. People who are satisfied with safe and secure occupations — like economics professor, school teacher, nurse, dentist or tax return preparer — expect to have much less wealth and income than risk-taking individuals who successfully capitalize on splendid ideas that result in products and services that benefit all of society. In this system, quantity, quality, and prices are determined by the demand and supply of goods and services.
The diagram below depicts one of many markets. The good or service being exchanged could be homes, X-rays, bank reserves, hours of low-skilled labor needed, tickets to Solo: A Star Wars Story, or, in this case, smartphones. Demand (the blue line) and supply (the red line) meet at the purple point. Assuming a free market system of no taxes, subsidies, price controls, regulations, prohibitions, government ownership, etc., 150 smartphones are produced and sold to 150 consumers at a price of $700.
The blue demand line represents a queue that sorts people according to their willingness to pay. The person with the lowest willingness to pay is at the right end of demand (the blue point). He or she is only willing to pay $200 for a smartphone. The person with the highest willingness to pay is at the left end of demand. He or she is willing to pay up to $1200. Whereas only one smartphone would be sold if the price is $1200, 300 smartphones would be sold at a price of $200. Read the rest of this entry »
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